Lok'nStore : Interim Results 2021

LOK'NSTORE GROUP PLC ("Lok'nStore" or "the Group")

Lok'nStore Group Plc, the AIM listed self-storage Company announces interim results for the six months to 31 January 2021

Unprecedented growth in occupied space drives strong trading performance, robust cash flow and an increased dividend

Highlights:

Strong trading

• • Group revenue £10.21 million up 13.9% (31.1.2020: £8.97 million)

• • Group adjusted EBITDA1 profit £5.5 million up 17.3% (31.1.2020: £4.7 million)

Cash flow growth drives interim dividend increase

• • Cash available for Distribution (CAD)3 £3.49 million up 19.7% (31.1.2020: £2.92 million)

• • Interim dividend 4.33 pence per share up 8.25% (31.1.2020: 4 pence per share)

Increasing net asset value

• • Adjusted Net Asset Value (NAV) per share5 up 6.8% to £5.68 (31.1.2020: £5.32) (31.7.2020: £5.56)

Secure balance sheet

• • £11.3 million cash at period-end (31.7.2020: £13.1 million)

• • Net debt (excluding lease liabilities) £42.6 million (31.7.2020: £38.3 million)

• • Loan to value ratio6 20.4% (31.7.2020: 19.3%)

• • Average cost of debt 1.55 % (31.7.2020: 1.69%)

Unprecedented occupancy growth

• • Occupied space up 24.7% since January 2020

• • Occupancy up from 67.1% to 81.6% of available space

• • Store EBITDA Margins increased from 55.8% to 58.5%

• • Store management fees £0.74 million up 87.5 % (31.1.2020: £0.39 million)

Active pipeline of new landmark stores7

• • Store pipeline of 13 sites will add 38% of new space over coming years

• • 2 new stores opened (including Salford post-balance sheet)

• • 2 new stores acquired (plus Basildon post-balance sheet)

• • Building 4 new stores

• • Chichester Managed Store acquired.

Commenting on the Group's results, Andrew Jacobs Chairman of Lok'nStore Group said,

"We continue to build our pipeline of prominent Landmark storage centres tapping in to deep latent demand for storage in the U.K and our store team members have worked tirelessly to provide great service to our customers. As a result, we have achieved an unprecedented growth in occupied space of 24.7% in the period and this has driven strong growth of revenue and profits".

"We have added to our new store pipeline which increases operating space by 38% to over 2.5 million sq. ft. over the coming years. We opened our new Leicester store in August and our new Salford store after the period end. Construction is underway at our sites in Warrington, Stevenage and Wolverhampton. Continuing this exciting period of growth, our objective is to build more Landmark stores in an under-supplied market while remaining conservatively geared delivering sustainable growth and consistently increasing dividends. We are raising the interim dividend by 8.25% to 4.33 pence per share."

Key Performance Indicators (KPIs))

What we mean when we say… (and why we use these Key Performance Indicators)

• 1. Group Adjusted EBITDA - Earnings before interest, tax, depreciation and amortisation - This measure strips away non-cash charges, finance charges and tax and now also reflects the removal of operating lease costs from operating expenses as a result of the implementation of IFRS 16. Group Adjusted EBITDA is defined as EBITDA before losses or profits on disposal, share-based payments, acquisition costs, exceptional items, finance income, finance costs and taxation.

• 2. Other income and expenditure items - refers to one-off items of a non-operational nature which arose during the year, often relating to asset disposals, and are unlikely to be recurring. (Refer Note 3(c) of the Interim Financial Statements).

• 3. CAD - Cash Available for Distribution - is calculated as Adjusted EBITDA less total net finance cost, less capitalised maintenance expenses, New Works Team costs and current tax. This measure is designed to give clarity to the capacity of the business to generate ongoing net operating cash that can be used to pay dividends to shareholders or pay down debt. The calculation of the Cash available for Distribution is set out in the Business and Financial Review.

• 4. Adjusted Total Assets - The value of adjusted total assets of £235.9 million (31.01.2020: £213.9 million)

  (31.07.2020: £229.4 million) is calculated by adding the independent valuation of the leasehold properties of £16.7 million (31.01.2020: 18.7 million) (31.07.2020: £16.7 million) less their corresponding net book value (NBV) £3.5 million (31.01.2020: £3.8 million) (31.07.2020: £3.7 million) to the total assets in the Statement of Financial Position of £222.7 million (31.01.2020: £199.0 million) (31.07.2020: £216.4 million).

  This provides clarity on the significant value of the leasehold stores as trading businesses which under accounting rules on operating leases are only presented at their book values within the Statement of Financial Position.

• 5. NAV - Net Asset Value per share - Adjusted net asset value per share is the net assets adjusted for the valuation of leasehold stores (properties held under property leases) and deferred tax divided by the number of shares at the year-end. The shares held in the Group's employee benefits trust and treasury

  shares are excluded from the number of shares. The calculation of the Net Asset Value per share is set out in the Business and Financial Review.

• 6. LTV - Loan to Value Ratio - measures the debt of the business expressed as a percentage of total property assets giving a perspective on the gearing of the business. The calculation is based on net debt (excluding IFRS 16 lease liabilities) of £42.6 million as set out in note 15 (31.01.2020: £31.9 million)

  (31.07.2020: £38.3 million) as a percentage of the total properties independently valued by JLL, the Directors valuation placed on the new Leicester store, and including development land assets all totalling £209.2 million (31.01.2020: £185.6 million) (31.07.2020: £198.3 million) as set out in the Business and Financial Review in the Analysis of Total Property Value table.

• 7. Pipeline Sites - means sites for new stores that we have either exchanged contracts on or have agreed heads of terms and are progressing with our lawyers towards completion. We now have 13 pipeline sites of which 11 are contracted and 2 are currently with lawyers.

• 8. Adjusted Store EBITDA is Group Adjusted EBITDA (see 1 above) before the deduction of central and head office costs. Unlike Group Adjusted EBITDA this measure excludes the impact of IFRS16 and includes leasing charges as normal operating costs of each store. The measure is designed to give clarity on the recurring operating cash flow of the business and provides important information on the underlying performance of the trading stores and shows the cash generating core of the business. Use of this metric enables us to provide additional information on store EBITDA contributions (after leasing costs) and the margins analysed between freehold and leasehold stores and according to the age of the stores. This analysis is set out in a table in the Business and Financial Review.

• 9. Gearing - refers to the level of a company's debt related to itsequitycapital, usually expressed in percentage form. It is a measure of a company's financialleverageand shows the extent to which its

  operations are funded bylendersversus shareholders. Gearing can be measured by a number of ratios and we use the debt-to-equity ratio in this document. The calculation of the gearing percentage, also referred to as the net debt to equity ratio is set out in Note 15 of the Interim Financial Statements.

• 10. Group Adjusted EBITDAR - EBITDAR is Earnings before interest, tax, depreciation amortisation and rent.

  The measure is designed to give clarity on the effect of the rent payable by leasehold stores and how its elimination enables an analytical comparison between freehold stores operating performance (which do not pay rent) and leasehold stores operating performance. This analysis is set out in a table in the Business and Financial Review on page.

• 11. Cost Ratio - calculates the ratio of the total operating costs of the business as set out on page ● of the Business and Financial Review, expressed as a percentage of total group revenue (note 2), giving a perspective on the cost efficiency of the business when compared to the cost ratio of the previous year.

• 12. LFL- Like for Like - This measure is used to give transparency on improvements in the operating business unrelated to the opening of new stores or closure of old stores therefore giving visibility of the true trading picture. The like for like key performance measure is only used where its use is particularly relevant to illustrate a performance metric not otherwise apparent.

Chairman's Statement

I want to report to you on the excellent first half of the financial year to 31 January 2021.

The first half-year results can be summarised as:-

• • Unprecedented growth of occupied space across our stores

• • Strong operating performance resulting in strong revenue and profit growth

• • Store pipeline will increase trading space by 38% to 2.5 million sq.ft.

• • Increased dividend

This is an impressive set of results with Lok'nStore continuing to deliver on our commitment to sustainable growth. The continued investor interest in the self-storage sector together with the corresponding market transactions underpins the value of our assets and our strategy to open more landmark stores.

The detail behind these results is discussed further in our Business and Financial Review.

Increased Dividend

Lok'nStore's dividend payments to shareholders reflect the growth in the underlying Cash Available for Distribution (CAD) which is up 20.0% on an annualised basis.

At this interim stage we will pay one third of the previous year's total annual dividend which equates to 4.33 pence per share, up 8.25% on the 4 pence per share interim dividend last year. The increase in the interim dividend follows a consistent pattern of dividend growth reflecting the continued growth of the Group. The interim dividend will be paid on 11 June 2021 to shareholders on the register on 7 May 2021. The ex-dividend date will be 6 May 2021. The final deadline for Dividend Reinvestment Election by investors is 21 May 2021. The final dividend will be declared when the Group's full year results are announced in late October 2021.

Investment in our stores

While we invested £9.6 million in sites and store development in this period, we are able to report a period end loan-to-value (LTV) ratio of only 20.4% (31.1.2020: 17.2%) (31.7.2020: 19.3%) and net debt of £42.6 million (31.1.2020: £31.9 million) (31.7.2020: £38.3 million).

The Group continues to find high quality sites for new Landmark stores. Trading at our new stores has been strong and this underpins our confidence that our pipeline will add further momentum to sales and earnings growth, adding 38% more high quality trading space to our portfolio. We are on-site at four stores, all of which will be trading by the end of 2021.

Managed Stores

Our strategy includes increasing the number of stores we manage for third party owners. This enables the Group to earn revenue without having to commit capital, to amortise fixed central costs over a wider operating base and drive further traffic to our website which benefits our entire operation. We generated managed store income of £0.74 million this period, up 87.5% from the previous period supported by £0.3 million of supplementary non-recurring fees (Refer analysis of Management fees in the table below). Second half income will also benefit from additional fees from managed store development and planning success.

Managed store income is generated from our existing platform and central management, resulting in an effective margin from this activity of 100%. Our current pipeline of managed stores includes an additional 5 stores which will take the total number of managed stores to 16.

Our Objectives

Our strategic and operational objectives are to:

• • Steadily increase cash available for distribution (CAD) per share enabling a predictable growth of the dividend from a strong asset base with conservative levels of debt

• • Fill existing stores and improve pricing

• • Acquire more sites to build new landmark stores

• • Increase the number of stores we manage for third parties